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Friday, 28 June 1996
Page: 2543

Senator SCHACHT(10.52 a.m.) —Senator Margetts has raised a very important issue regarding what I would call the transparencies or the process of granting a policy by-law and the lobbying process that goes with it. As a former minister responsible for the policy by-law process for a couple of years, I agree that these questions raised by Senator Margetts are very relevant. However, I want to point out to her that, as I discovered very rapidly, there is a very detailed legal process established with regard to policy by-laws. They are not a simple issue. It is not simply a matter of a minister capriciously granting a policy by-law to someone who is more effective in lobbying than someone else. If that happened under the existing law, I have no doubt that minister would rapidly be before a court facing a major dispute with somebody who opposed the granting of the policy by-law. Conversely, if the minister did not grant the policy by-law, it could be challenged that he took that decision capriciously.

The minister in these cases acts under the law and the regulations on the advice of the departments. In both the DIST and Customs there are delegated offices who have to carry out a proper due process of seeking the information and explaining why a policy by-law can be granted after a tariff concession has been refused. That process may be very complicated, and that may be one of its worst aspects, but it is complicated because we are trying to be fair and transparent in the running of the system. So that is not an issue I have concern with because I have sat through the process.

My main complaint may be that, because a system is made transparent and in a way that means a capricious decision cannot be made, we have very complicated rules and processes. This means that a whole industry of consultants lives from giving advice to companies about the process of obtaining a policy by-law. If there is an area of micro-economic reform that may be useful in this country, it would be reducing the need for companies to have consultants advising them about the granting of policy by-laws. That would be very useful, in my view, because it would reduce the cost to industry. Again, it is very much a function of the rules this parliament has imposed that ensures the capriciousness or off-handed approach of a minister being heavily influenced or lobbied by somebody in that area.

Though it is true that in certain industries and certain areas there would be large com panies applying for policy by-laws, plenty of smaller companies can and do apply for them and have them granted. If you look at the total picture of obtaining a policy by-law for major projects, it is by definition. When it was at $50 million, obviously it would be a bigger company or a major organisation putting forward that project because of the size of the project. As I understand it, this bill has reduced the policy by-law size down to $10 million for major projects. I think that will enhance smaller businesses and smaller organisations being able to access the advantage of policy by-laws.

I do not know whether Senator Margetts will trust the advice of a former minister on this issue, but I can assure her that there are very strict procedures. It is actually not the minister who signs the policy by-law. He signs a note that the recommendation coming from the departments is in accordance in his view with the government's policy initiatives. Senator Cook has outlined the reasons why we believe there is a policy outcome for the development of Australian industry to be more export oriented and export competitive: the creation of jobs and growth in Australia.

Senator Margetts raised concern about amendment No. 2, which deals with the use of chemicals. It is unavoidable that plastics will have to be used from time to time and chemicals will be used to promote the use of the production of plastics. To try to separate plastic out because of its polluting quality or its littering of the landscape I would think would be very difficult under item 57. Though her concern is reasonable to raise, I do not think the three per cent ought to be reduced to zero. We believe that overall we receive wider benefits from the promotion of these industries. It will make them more competitive and will create more jobs in Australia.

Senator Cook outlined the policies regarding the agrifood area. The former government's policy—and I hope it will be the new government's policy—was to take further advantages from being able to produce clean, green food in Australia. We exported it, properly processed, at a very high quality so that that clean, green feature even when processed is recognised around the world.

In some cases, it will involve plastic packaging to maintain freshness. Senator Margetts might be aware that CSIRO and others have developed plastic packaging that maintains THE freshness for three months of the exported clean, green Australian agricultural product. That means that people overseas are getting access to food that is less processed, fresher and more nutritious. The plastic not only benefits our industry but also improves the nutrition level of the less processed food for people overseas. You have to weigh up the advantages of a plastic that can be produced as cheaply as possible.

The performance of the government on the issue of tariff concessions and policy by-laws over the last couple of months has been convoluted and contorted to say the least. They accepted the position we announced in the budget when in government of abolishing the tariff concession system. When the now Treasurer, Mr Costello, and the then shadow finance minister, Mr Prosser, accepted our announcement about savings, I do not think they understood as we did the impact it would have.

We were quite open about the impact. We knew that some people would disagree with the decision. But in order to ensure that all our election promises were funded, that was the responsible decision that we took. It has been a bit of a circus since the election, with the new government trying to understand the impact of all of this and then trying to come up with their own significant change, which is that the tariff concession system would not be abolished but would continue at three per cent, with consumer goods included and three per cent applied to policy by-laws in a number of areas.

This is a misunderstanding of the reason policy by-laws were established in the first place. Originally, it was to grant a complete exemption from tariff. When you fail on a tariff concession to get the exemption, there are good policy reasons, as Senator Cook has explained, why the policy by-law system would operate to allow, under the circumstances outlined in the rules, those products to be imported without paying any tariff at all.

I cannot see the difference between having a tariff concession operating in a number of areas at three per cent and a policy by-law operating in some areas at three per cent. Obviously, if you have a policy by-law operating at zero there is an advantage over a tariff at three per cent. But why, if you were rejected for a tariff concession at three per cent, would you apply for a policy by-law which still hits you with three per cent?

This is the confusion the government is in because its ministers have not understood the basic difference between a tariff concession process and the policy by-law. I again make the point that it indicates that the government has got itself into a very confused and convoluted state in trying to work out this system to appease the lobbying going on from various groups in the community.

When we made the announcement that we would abolish the tariff concession system we said that the policy by-laws would still apply in all categories and, with respect to project status, we would drop it from $50 million to $10 million. The government is still doing that. But we did not say that some policy by-laws would operate at a three per cent level. We said that all our policy by-laws would continue to operate and at a zero level. If you can prove a policy case in terms of the national interest—to develop Australian industry—you should have access to that process.

We now have a convoluted outcome. Fortunately, I think the government has accepted the amendments proposed by the opposition and the other parties to exclude consumer goods, as we excluded them in our announcement when we were in government. At that time I do not think the then opposition understood the difference between consumer and business items. We certainly did, and that is why we made the announcement.

When the list was finally tabled the other day in answer to a question on notice—a list which ran to a couple of thousand consumer items—you could see that putting the tariff concession at even three per cent on those items would be a substantial new tax. Let's not beat around the bush: it is a new tax; in its own way it is a mini GST applying to consumer items in Australia.

The opposition parties in the Senate have done a very good job in forcing the government to back away from that measure. I still think that it is a mistake to apply a three per cent tariff to some of the policy by-laws. In some cases it makes policy by-laws irrelevant because with the tariff at three per cent you are saying, `You missed out on the tariff concession, so apply for a policy by-law—but if you get it we will still hit you with three per cent.'

That is just ridiculous. You might as well abolish the policy by-law of three per cent in all those areas and just stick to the tariff concession. But that is a bit difficult for the intellectual capacity of these ministers. That is why we have the very higgledy-piggledy outcome with which we in the opposition are very kindly trying to help.